Foreign ownership, firm performance, and the geography of civic capital

Matthias Bürker, Chiara Franco and Gaetano Alfredo Minerva

Regional Science and Urban Economics, 2013, vol. 43, issue 6, 964-984

Abstract: It is well established in the literature that foreign affiliates are subject to a series of governance and assimilation costs that may deteriorate their performance. This is particularly relevant for firms which have been recently acquired by foreign investors. We employ the variation in civic capital across Italian provinces as an exogenous determinant of these governance costs. We claim that the effect of foreign ownership on productivity is less favorable in areas where civic capital is low. As the level of local civic capital increases, the scope for opportunistic behavior is reduced, which makes the governance of foreign affiliates easier and improves their performance. We take this prediction to the data and find confirmation of our conceptual framework. Our analysis uncovers the importance of the geographic heterogeneity of informal norms and institutions in analyzing the nexus between foreign ownership and performance.

Keywords: Performance of foreign owned firms; Civic capital; Total factor productivity; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: D21 D23 F21 F23 R30 Z13 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Foreign ownership, firm performance, and the geography of civic capital (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:43:y:2013:i:6:p:964-984

DOI: 10.1016/j.regsciurbeco.2013.09.009

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